Two reports made their way into my inbox today. "First Insights - Thailand: Export growth turns positive in February," and "Asia Insights - Thailand: Export slump continues in February."
They both come from the same brokerage, Nomura, just to make things more confusing.
The first conclusion is that the confused situation in Thailand is not restricted to politics. For the past five years under a military dictatorship, executives and investors have been unsure about how to position themselves. The junta could change any rule it liked by "emergency decree," with no warning. Not the best set of conditions for long-term plans, whether with a portfolio or production expansion.
It's hoped that the restoration of democracy will remove some of that uncertainty. The results of Thailand's elections on Sunday are coming in as I write. While the military has finally allowed elections for the first time since 2011, it also has ended up winning said elections, in a ballot-box "surprise."
That has done little to clear away any of that fog obscuring investors' vision. Thai stocks fell on Monday, with the benchmark Stock Exchange of Thailand Index down 1.2%.
Naturally, there will be plenty of questions about how the military's election victory has come about. The "red-shirt" followers linked to exiled former prime minister Thaksin Shinawatra have won every election since 2001, and were expected to do so again. They represent the common man, the huddled masses, the hinterlands of the country's populous, poor, agricultural northeast.
At last count, the main military-backed party has mustered 7.5 million votes, and the largest red-shirt party, Pheu Thai, has claimed 7.0 million. Voter turnout, at around 66%, was far lower than the expected 80%. With some 6% of ballots invalidated, there are plenty of questions about the military's actual mandate to govern.
Still, it seems that the military will maintain its grip on power, after allowing some vestige of democracy to take place. Even if the red shirts had won the popular vote, their elected Members of Parliament in the House of Representative would have been counteracted by the Thai Senate, whose entire 250 membership is appointed by the military.
New King Maha Vajiralongkorn had pushed for these elections, which the military had repeatedly delayed. The monarch is keen for Thailand to return to a more settled political picture. He issued a rare statement ahead of the elections, reminding the populace of his father's pledge to "support good people" to govern society and "control the bad people" to prevent them from "creating chaos."
Turns out the military has something to do with that confusing situation about the exports that are positively growing/slumping.
The headline number shows that exports for February showed a shock rise compared to the same time last year of 5.9%. That's quite the turnaround from January, when they fell 5.6%.
They declined if you rule out a one-off shot in the arm from military exports. A bunch of military hardware was shipped into Thailand in January, for combined exercises between the Thai military and U.S. forces. Much of that materiel was exported back out of the country the following month.
So besides holding the balance of power, the military is also skewing Thailand's economic numbers. You really can be all you can be, and more, in the Thai army!
Thai and U.S. forces hold exercises dubbed Cobra Gold every year. The 2019 iteration took place from Feb. 12-23, with 4,500 U.S. personnel involved in war games and humanitarian projects. Troops from South Korea, Singapore, Indonesia and Malaysia, as well as members of Japan's "Self-Defense Forces," also took part.
Minus all the munitions, exports actually fell 3.4% in February, which makes a lot more sense next to the January numbers. In fact, it makes four straight months of declining exports, so they are definitely slumping rather than positively growing.
Exports to the United States actually rose, up 4.8% after discounting for weapons. They were up to Southeast Asia and narrowly down to China. The real deterioration came with sales to Japan and Europe. Cars and electronics, amid the global tech downturn, were both particularly poor.
It doesn't look like Thailand has much good news on the economic front either, with electronics sales likely to remain subdued, and growth in tourist numbers slowing as it sinks in that most economies globally are slowing, too. Thailand's economy is forecast to fall from growth of 4.1% last year to 3.6% in 2019.
Besides those foreign armies, overseas investors have also been withdrawing their forces from Thailand. They have withdrawn almost US$730 million in stocks and bonds since the start of the year, according to Financial Times calculations, having invested a net US$1.2 billion into Thailand over the same period last year.
Although the election has passed smoothly, its results have only nudged Thailand forward. The military still controls the country, with a democratic sheen over its elected government.
Investors should wait until at least May, when the Thai king will have his coronation, before considering Thai stocks for investment. That will produce a "feel-good" bounce.
And the SET Index is due a recovery, its stock market having basically trodden water since the military seized power in the 2014 coup. But the election has not removed the overhang, and the time has not yet come to bet on that recovery now. Stay away until May.
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